Iraq has not put its oil reserves up for sale

The following correction was printed in the Guardian's Corrections and clarifications column, Wednesday October 29 2008

The use of the word "our" in the subheading above might have suggested that Fadhil Chalabi was writing as a representative of the Iraqi government. That is not the case and his view is an independent one. He has not lived in Iraq nor worked for the Iraqi government since 1976

It appears your reporters were confused by the term "risk service agreement", by which the Iraqi government invites various oil companies (which possess the latest technology) to enter into service contracts in order to restore and increase the production capacity of Iraq's oilfields. By definition these service agreements do not entitle companies to any share of, or access to, oil reserves.

The proposed agreements concern first and foremost the rehabilitation of existing oil-producing fields, such as Kirkuk and Basra, whose production capacity has fallen dramatically as a result of air strikes during two Gulf wars and prolonged UN sanctions. The prime target is to restore the fields' capacity to the higher levels which, prior to those wars, stood at around 4m barrels per day. This rehabilitation urgently needs to be achieved if Iraq's beleaguered economy is to recover (regardless of the continued presence of coalition forces).

However, it is quite evident that certain vested interests, in particular some in other oil-producing nations, seek to thwart any substantial improvement in Iraq's oil production levels, as any such increase will affect their market shares and risk pushing oil prices downwards.

Prior to Saddam's invasion of Kuwait and the 1991 Gulf war, Iraq's production quota stood at around 14.5% of Opec's total production (without Angola, which has recently joined the organisation). If Iraq were to regain its quota share, its daily oil production would increase by 2m barrels, thereby posing a problem for Opec in adjusting its quota system.

It is only to be expected that Iraq wishes to restore its former oil production capacity, and it is absurd to misinterpret this as handing over Iraq's reserves to the international oil companies.

Your reporters quoted their source as Greg Muttitt, who represents "a UK-based social and ecological justice group" and who professes to be "alarmed that the government is pushing ahead with its plans ... [because] there is no precedent for proven oil reserves of this magnitude being offered up for sale". But the negotiations in question have nothing whatsoever to do with Iraq's reserves. The agreements would never apply either directly or indirectly to any control of reserves, which remain under the sacrosanct ownership of Iraq. What is unusual about the contracts is that they are set to last for 20 years, whereas normally the service contractor finishes his contract term as soon as the tasks assigned by the government are completed.

It is evident from Muttitt's conclusions that he lacks knowledge of Iraq's service contracts and the oil reserves situation. The prospect of a speedy rehabilitation of Iraq's oil industry should be welcomed, not dismissed as a conspiracy on the part of the oil companies to rip off Iraq's oil wealth.

• Fadhil Chalabi is the executive director of the Centre for Global Energy Studies, London, and Iraq's former permanent undersecretary for oil forbes@cges.co.uk

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